Question

Short answer type questions:
State the basis of classifying government expenditure into revenue and capital expenditure. Give an example of each.

Answer 1

Capital expenditure refers to the estimated expenditure in a fiscal year which creates assets for the government and causes reduction in liabilities for the government. For example: expenditure on lands and building, purchase of shares, expenditure on machinery and equipment.

Whereas, revenue expenditure refers to the estimated expenditure in a fiscal year which does not create assets for the government or reduction in liabilities. For example: wage bill of the government, interest payments, etc.